YouTube lures corporates but not their ads

YouTube's reach is being noticed by both local corporates and international brands in the region.

Dubai's Roads and Transport Authority was the first such entity to realise the potential of the portal and negotiated its presence for the purpose of communicating with its customers.

Media professionals do not debate the reach of YouTube, which is more than one billion users a day, but they are apprehensive about advertising on the portal. Worldwide ad revenue from the popular video-sharing site has fallen short of Google's expectations this year, and is likely to total about $200 million (Dh734m) for the full year, according to two people familiar with the matter.

The $200m figure is far below the huge revenues that Google generates from search-related advertising. First-quarter revenues at Google were $5.19 billion, implying that video advertising will account for only one per cent of all turnover by year-end.

YouTube's advertising revenues are falling short of expectations because of concerns about intrusiveness, fears among corporate advertisers about copyright infringement and an inefficient sales operation.

Google does not give a breakdown of the revenues at YouTube, but its executives have repeatedly said over recent months that they have struggled to find a way of introducing and selling advertising into the vast library of video that it shows every day.

Copyright litigation has complicated the YouTube ad push. Viacom Inc sued Google last year in connection with clips of TV shows and films posted without authorisation by YouTube users. Although Google says it hasn't broken copyright laws, it significantly cut back on the number of clips it would sell ads against, so as not to sell them against infringing material, according to a person familiar with the matter.

Fearful of fuelling allegations that it is profiting from copyright infringement, Google will only sell ads against YouTube clips that have been posted or approved by media companies and other partners – roughly four per cent of the total, says one person familiar with the matter.

In the UAE, RTA launched special channels through YouTube as a further tool of interaction with the public and customers and reach to wider segments of the community targeted by its services, educational campaigns and other issues.

Beyman Younes, Director of Marketing & Corporate Communication Department at RTA Corporate Support Services Sector, said: "YouTube is one of the many ways to reach the public. Any medium might have shortcomings that an advertiser wouldn't want to be associated with, this includes TV stations, radios or newspapers.

"Yet, YouTube is still a very effective way of communication for us, especially supporting our strategy to reach out to the younger generation. Although I cannot provide figures, a majority of UAE young population, between 25 and 35 years of age, comprise our online audience. I am sure YouTube has its own strategies to solve its problems. Meanwhile, we are a small part of this whole strategy and we are working on engaging our audience locally and globally."

At MEC Interaction, Mediaedge:cia Middle East online unit, Andreanne Leclerc said: "When advertisers choose to advertise on YouTube it is to be part of the user-generated content trend and to associate their brand with that phenomenon, that is more for branding purposes. So why or why not to choose YouTube: the major element to take into consideration is the nature of the brand, its values and the image to be projected. Using YouTube because it is cool and trendy can be a good reason but it depends on what you want to communicate to whom."

Leclerc added: "YouTube is in the 10 most-visited websites in the Middle East and has a large amount of traffic. In this region, however, a lot of brands are very careful and sensitive about being associated with inappropriate content."

OMD Digital has advertised on YouTube with varied success. Dimitri Metaxas Group Director at OMD Digital said: "Success has more to do with certain brands associated with certain types of content. Youtube is definitely not the right channel for all brands".

"We will continue to advertise with YouTube as it provides a solid audience with good performing ad spots. Ultimately the best way to get your brand into Youtube is by infusing it into the video content, thus making your brand a destination in itself for the internet user rather than just to advertise around the fringes".

General Motors Corp has been a regular buyer of Google search ads. More than a year ago, it experimented with advertising its Cadillac brand on YouTube. Since then, it hasn't significantly boosted its YouTube ad buying, said Mike Devereux, GM's executive director of digital marketing and customer relationship management. He said GM was watching Google's ad-diversification plan closely. "As they get their platform ready for other media, we will get there with them," he added.

Last autumn, Tim Armstrong, Google's head of advertising and commerce in North America, said he began to realise that internal problems were interfering with progress. The inefficiencies, he explained, were a product of Google's rapid growth and its innovation. Streamlining the systems and developing new ad formats, he said, should eventually improve the company's bottom line.

By May, Armstrong and his colleagues had identified some 105 problems with YouTube's ad sales. Twenty months after Google bought YouTube for more than $1.7bn, they have begun to untangle the problems with its ad operations – which generated 98 per cent of Google's revenue in the first quarter. The initiative is code-named "Project Spaghetti". Armstrong described Project Spaghetti as an effort to fix the plumbing behind all of Google's ad initiatives.

YouTube is critical to Google's campaign to extend its advertising reach far beyond text ads tied to web searches, its revenue powerhouse. Google wants to sell more video ads and display ads on YouTube and elsewhere. It also wants to crack the television, radio and newspaper ad markets. Its target: 90 per cent of global ad dollars that don't currently flow to the internet.

Google's 2006 acquisition of YouTube signalled that it had big ambitions for online video advertising. YouTube's revenue was only about $15m that year, Bear Stearns analysts estimated. But Google believed YouTube would be attractive to traditional TV advertisers and others.

It isn't the first time Google has wrestled with advertising problems. Six years ago, it changed its sales model for so-called search ads: when Google users conduct a web search, ads related to the search words pop up next to the results. Google began charging advertisers only when users clicked on the ads, not every time they appeared on a user's screen.

Project Spaghetti, Armstrong said, should be completed by the end of the third quarter. But even if the internal problems are ironed out, Google still has to persuade advertisers to spend more on its new ad offerings.

Armstrong said it would take Google another five or 10 years to realise its advertising vision. He said advertisers were getting on board, but he said the company's main rivals have adopted similar approaches. "The next five years of the internet is about execution," he said.

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